New Reporter
04-08-23, 10:25
Sound reasons to support lofty rents for Singapore homes
Jul 31, 2023
OVER the past year or so, I have heard numerous tales of home-rental woes. Many tenants of both private and Housing and Development Board (HDB) homes faced steep rental hikes on lease renewals. Some people have had to move to more distant locations or smaller units.
Rental rates of private homes increased by 29.7 per cent in 2022, data from the Urban Redevelopment Authority (URA) showed. Between Q4 2022 and Q2 2023, rental rates of private homes rose by a further 10.2 per cent.
https://i.imgur.com/HZsz3bZ.png
Based on HDB’s data, the median monthly rental rate of a four-room HDB flat in Ang Mo Kio, Tampines and Toa Payoh rose by 43 per cent to S$3,300, 45 per cent to S$3,200 and 40 per cent to S$3,500 respectively between Q4 2021 and Q2 2023.
While tenants may gripe about greedy landlords, many homeowners have to pay higher property taxes and interest rates on home loans.
In perspective, home rents have risen fairly modestly over a longer time horizon.
Over periods of 10 years and 15 years to Q2 2023, URA’s rental index of private homes rose by a compound annual growth rate of 3.3 per cent and 2.3 per cent respectively.
Growth in home rental rates could taper as more homes get built, thereby adding to the housing stock. An estimated 12,306 private homes including executive condominiums are slated for completion in H2. Tenants may soon have greater choice and stronger bargaining power.
Still, if new homes being built are mainly used for owner-occupation, the rise in the number of rental homes may be limited.
Is there a need to cap residential rental rate adjustments, so home rents here are palatable to skilled foreign talent as well as locals who are leasing homes?
In a parliamentary response in early July, the Ministry of National Development said international experience has shown that while rent controls may moderate rises for some tenants in the short run, they are likely to distort the housing market.
Also, rent controls may lead to a cut in properties available, prompting demand to outstrip supply as well as disincentivise landlords from maintaining proper upkeep of their rental units.
I think sound reasons exist for homes here to fetch good rental rates.
If the employment level remains high and workers see growth in wages, many tenants are able to pay higher rents. Based on data from the Ministry of Manpower, the annualised total wage change, including employer Central Provident Fund contributions, was 4 per cent between 2017 and 2022. This period includes the time when the Covid-19 pandemic adversely impacted the economy.
Higher paid foreigners
Crucially, Singapore’s economy is moving up the value chain. With Singapore’s credible management of the Covid-19 pandemic and geopolitical tensions, some companies are shifting business functions to flight-to-safety destination Singapore or investing more here.
As major companies from diverse sectors grow their operations here, more high-paying jobs could be based out of Singapore. Some high-paying jobs are held by foreigners, who often lease homes. Foreigners who are not permanent residents may not buy homes because of the Additional Buyer’s Stamp Duty of 60 per cent that applies to them.
Singapore is actively wooing global talent. From this year, top global talent can apply for the Overseas Networks and Expertise Pass (ONEP), which has a five-year duration. Pass holders can concurrently start, operate, and work for multiple companies here at any one time.
The qualifying minimum salary for the applicants is a fixed monthly salary of S$30,000. Individuals with outstanding achievements in selected sectors are also eligible, even if they may not meet the salary criterion.
Moreover, foreigners in general need to meet higher salary thresholds to work here.
From September, the minimum qualifying monthly salary for new applications and renewals of Employment Pass (EP) is S$5,000. For the financial services sector, the bar is S$5,500. The EP allows foreign professionals, managers and executives to work here.
The minimum qualifying monthly salary rises with age for both EP and S Pass holders.
The salary threshold to meet for skilled workers who are on S Pass will rise shortly and increase further over the next few years.
Lifestyle changes
Another driver supporting residential rental rates is lifestyle changes. Many people are doing more from their homes and may thus allocate a larger share of income to leasing a home.
Some knowledge workers spend large amounts of time working from home. For such persons, sharing a home with flat mates can be undesirable.
Many have also grown accustomed to using streaming services to consume entertainment at home or food delivery services to dine from the comfort of their residences.
With a monthly budget of S$3,000-S$4,000, one can rent an HDB four-room flat in various locations or a centrally located one-bedroom condominium unit, including in newly completed developments.
At the top end of the market, monthly rent can go up to S$100,000 or more for a large bungalow in a prime area.
For a wealthy home renter, a luxury home can serve as a sanctuary for the family, as well as a good venue to entertain and impress business associates. Living in a prestigious house can help enhance one’s personal branding and further one’s business success.
Some young locals may rent a home to live independently before they save enough to buy a home, or while waiting for a new home to be ready. Local families may rent a home near a popular primary school in order to secure a spot in the said school for their kids.
Also, there are locals who rent homes while in between moving from one place to another or renovating their homes.
High rents pose problems for those leasing homes. However, there are ways to cope with the situation.
Renting an HDB flat instead of a condominium unit may hardly compromise one’s lifestyle, given the high quality of HDB flats and easy access to comprehensive amenities in many HDB towns. Staying in a far-flung location can work as the public transport network continues to improve.
As long as Singapore grows in attractiveness as a live, work and play destination, home renters will have to get used to paying high rents.
https://www.businesstimes.com.sg/opinion-features/sound-reasons-support-lofty-rents-singapore-homes
Jul 31, 2023
OVER the past year or so, I have heard numerous tales of home-rental woes. Many tenants of both private and Housing and Development Board (HDB) homes faced steep rental hikes on lease renewals. Some people have had to move to more distant locations or smaller units.
Rental rates of private homes increased by 29.7 per cent in 2022, data from the Urban Redevelopment Authority (URA) showed. Between Q4 2022 and Q2 2023, rental rates of private homes rose by a further 10.2 per cent.
https://i.imgur.com/HZsz3bZ.png
Based on HDB’s data, the median monthly rental rate of a four-room HDB flat in Ang Mo Kio, Tampines and Toa Payoh rose by 43 per cent to S$3,300, 45 per cent to S$3,200 and 40 per cent to S$3,500 respectively between Q4 2021 and Q2 2023.
While tenants may gripe about greedy landlords, many homeowners have to pay higher property taxes and interest rates on home loans.
In perspective, home rents have risen fairly modestly over a longer time horizon.
Over periods of 10 years and 15 years to Q2 2023, URA’s rental index of private homes rose by a compound annual growth rate of 3.3 per cent and 2.3 per cent respectively.
Growth in home rental rates could taper as more homes get built, thereby adding to the housing stock. An estimated 12,306 private homes including executive condominiums are slated for completion in H2. Tenants may soon have greater choice and stronger bargaining power.
Still, if new homes being built are mainly used for owner-occupation, the rise in the number of rental homes may be limited.
Is there a need to cap residential rental rate adjustments, so home rents here are palatable to skilled foreign talent as well as locals who are leasing homes?
In a parliamentary response in early July, the Ministry of National Development said international experience has shown that while rent controls may moderate rises for some tenants in the short run, they are likely to distort the housing market.
Also, rent controls may lead to a cut in properties available, prompting demand to outstrip supply as well as disincentivise landlords from maintaining proper upkeep of their rental units.
I think sound reasons exist for homes here to fetch good rental rates.
If the employment level remains high and workers see growth in wages, many tenants are able to pay higher rents. Based on data from the Ministry of Manpower, the annualised total wage change, including employer Central Provident Fund contributions, was 4 per cent between 2017 and 2022. This period includes the time when the Covid-19 pandemic adversely impacted the economy.
Higher paid foreigners
Crucially, Singapore’s economy is moving up the value chain. With Singapore’s credible management of the Covid-19 pandemic and geopolitical tensions, some companies are shifting business functions to flight-to-safety destination Singapore or investing more here.
As major companies from diverse sectors grow their operations here, more high-paying jobs could be based out of Singapore. Some high-paying jobs are held by foreigners, who often lease homes. Foreigners who are not permanent residents may not buy homes because of the Additional Buyer’s Stamp Duty of 60 per cent that applies to them.
Singapore is actively wooing global talent. From this year, top global talent can apply for the Overseas Networks and Expertise Pass (ONEP), which has a five-year duration. Pass holders can concurrently start, operate, and work for multiple companies here at any one time.
The qualifying minimum salary for the applicants is a fixed monthly salary of S$30,000. Individuals with outstanding achievements in selected sectors are also eligible, even if they may not meet the salary criterion.
Moreover, foreigners in general need to meet higher salary thresholds to work here.
From September, the minimum qualifying monthly salary for new applications and renewals of Employment Pass (EP) is S$5,000. For the financial services sector, the bar is S$5,500. The EP allows foreign professionals, managers and executives to work here.
The minimum qualifying monthly salary rises with age for both EP and S Pass holders.
The salary threshold to meet for skilled workers who are on S Pass will rise shortly and increase further over the next few years.
Lifestyle changes
Another driver supporting residential rental rates is lifestyle changes. Many people are doing more from their homes and may thus allocate a larger share of income to leasing a home.
Some knowledge workers spend large amounts of time working from home. For such persons, sharing a home with flat mates can be undesirable.
Many have also grown accustomed to using streaming services to consume entertainment at home or food delivery services to dine from the comfort of their residences.
With a monthly budget of S$3,000-S$4,000, one can rent an HDB four-room flat in various locations or a centrally located one-bedroom condominium unit, including in newly completed developments.
At the top end of the market, monthly rent can go up to S$100,000 or more for a large bungalow in a prime area.
For a wealthy home renter, a luxury home can serve as a sanctuary for the family, as well as a good venue to entertain and impress business associates. Living in a prestigious house can help enhance one’s personal branding and further one’s business success.
Some young locals may rent a home to live independently before they save enough to buy a home, or while waiting for a new home to be ready. Local families may rent a home near a popular primary school in order to secure a spot in the said school for their kids.
Also, there are locals who rent homes while in between moving from one place to another or renovating their homes.
High rents pose problems for those leasing homes. However, there are ways to cope with the situation.
Renting an HDB flat instead of a condominium unit may hardly compromise one’s lifestyle, given the high quality of HDB flats and easy access to comprehensive amenities in many HDB towns. Staying in a far-flung location can work as the public transport network continues to improve.
As long as Singapore grows in attractiveness as a live, work and play destination, home renters will have to get used to paying high rents.
https://www.businesstimes.com.sg/opinion-features/sound-reasons-support-lofty-rents-singapore-homes